However, in 100% of cases, the objective is to sell financial products, says the Securities and Exchange Commission. If they're not sold at the seminar, they're pushed in follow-up contact with attendees.

The report, the result of a year-long investigation of senior-targeted free-lunch seminars, was released at a Seniors Summit in Washington earlier this month. It stemmed from examinations at 116 securities firms by the SEC, the North American Securities Administrators Association and the Financial Industry Regulatory Authority.

The sweep was conducted between April 2006 and June 2007. It came amid FINRA Investor Education Foundation research that indicated 78% of seniors received a free lunch seminar invitation and 60% received six or more in the past three years. Examinations were in Florida, California, Texas, Arizona, North Carolina, Alabama and South Carolina due to their large populations of retirees.

As a result of the exams, 86 securities firms received deficiency letters or letters of caution requesting corrective action. Another 25 are under review for possible further action by a state, FINRA or the SEC.

"Financial services firms should take steps to supervise sales seminars more closely, and specifically review and approve all advertisements and sales materials for accuracy," the report warned. "In addition, firms should redouble efforts to ensure that the investment recommendations they make to seniors are suitable in light of the particular customer's investment objectives."

The targeted seminars typically are at fancy restaurants, country clubs, upscale hotels and golf courses. Some included incentives, such as door prizes, free books or vacation deals. Topics commonly discussed include annuities, equity-indexed annuities, real estate investment trusts, mutual funds, private placements and reverse mortgages. Urgent phrases, such as "limited seating available," were often used. Food is not usually served until the presentation is complete and contact information has been obtained.

The SEC found that 13% of such seminars are totally fraudulent-including apparent serious misrepresentations of risk and return, possible liquidation of all accounts without the customer's knowledge or consent and possible sales of fictitious investments.

One-half featured exaggerated or misleading advertising claims. Many broker/dealers failed to submit their sales material to FINRA for review, as required by advertising rules. Potentially misleading statements most frequently appeared in mailers and advertisements, and involved statements about the safety, liquidity or anticipated returns of products. Some sales materials compared dissimilar investments or services, cited misleading or confusing credentials, or had misleading testimonials. Too often, the targeted senior had no idea that the seminar's sponsor had a financial interest in product sales.

Twenty-three percent involved such possibly unsuitable recommendations as replacing one variable annuity with a new one, a practice that can incur steep costs. Also, despite the fact variable annuities are long-term investments, most of that firm's customers only had shorter-term time horizons of one to five years.

One firm recommended investing a whopping 80% of a client's net worth in variable annuities. This required that the client sell existing better-diversified and more liquid income-producing investments. The SEC also found that at least one firm inappropriately sold a fee-based account charging 1.838% of assets under management to a customer whose account had no transactions and held three variable annuities. Those variable annuities had separate internal management costs of about 3% of assets.

The report listed effective compliance and supervisory practices it found that "may be helpful to consider as securities firms are reviewing their supervisory and compliance practices in these areas." Those include centralized review and approval of proposed seminars and advertising materials, with a dedicated compliance person knowledgeable of securities laws and advertising rules.

The SEC also urged firms to establish policies and procedures for submitting proposals for sales seminars, including specific timeframes for supervisory review and approval. The SEC wants securities firms to forward advertising-including information on seminar guest speakers-to the home office to be reviewed and approved prior to use.

The SEC recommends firms establish written guidance for all individuals who may be involved in sales seminars. Those include the registered rep conducting it, the branch office manager and other supervisors who review and approve them and their sales literature.

The SEC also recommends: written checklists for reviewing and approving sales seminar ads and sales literature to ensure compliance.